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Views on the Potential Benefits and Limitations of Inducement Prizes

2013 Report to the US Congress, US Office of Science and Technology Policy

“Prizes have a good track record of spurring innovation in the private and philanthropic sectors. Early adopters in the public sector have already begun to reap the rewards of well-designed prizes integrated into a broader innovation strategy. … prizes have enabled the National Aeronautics and Space Administration (NASA), the Department of Defense (DOD), and the Department of Energy (DOE) to:
  • Establish an ambitious goal without having to predict which team or approach is most likely to succeed;
  • Benefit from novel approaches without bearing high levels of risk;
  • Reach beyond the usual suspects to increase the number of minds tackling a problem;
  • Bring out-of-discipline perspectives to bear
  • Increase cost-effectiveness to maximize the return on taxpayer dollars; and
  • Pay only for success.”

Grand Challenges Canada

“By their nature, prizes require tightly defined specifications that clearly articulate when and under what conditions the prize will be awarded. As such, it is very difficult for a prize strategy to drive new and novel thinking in areas where the desired outcomes cannot be readily articulated or measured.”

The Scottish Government

“Setting a prize challenge allows government to set its own complementary challenges including fostering partnerships and working with key partners with an aim to reducing regulatory barriers.”

The US Chamber of Commerce, Global Intellectual Property Centre

“By so tightly managing and controlling innovation outcomes, prizes and patent pools are unlikely to incentivize, reward, and deliver the breakthrough technologies, treatment and inventions necessary to solve global environment, public health, and other challenges. Indeed, if prizes and patent pools were inherently superior to patents alone, they would have already delivered groundbreaking innovative medicines and commercially available environmental technologies. That they have not, despite long histories, widespread knowledge of their uses, and recent attempts, is perhaps the surest testament to their limitations.”

Center for Global Health R&D Policy Assessment

“Prizes can separate or de-link reward for innovation from product prices. In other words, they separate markets for R&D from markets for products. Since R&D is expensive and risky, product developers relying on product sales to repay R&D costs must charge more than the cost of producing the product, sometimes much more; this distorts markets and can be an important barrier to access. Some have proposed that access to new products could be maximized by paying for R&D through prizes and then allowing prices to fall close to cost through competitive supply.”

X PRIZE Foundation

“Prizes provide investment leverage. In an era of limited and shrinking government and philanthropic budgets, this is increasingly important. A well-constructed prize can magnify the funders’ investment, as the competitors in aggregate can spend many times the amount of the prize purse.”

US Government, Office of Management and Budget

“Prizes can further a government agency’s mission by attracting more interest and attention to a defined program, activity, or issue of concern, while capturing the public imagination and changing the public’s perception of what is possible.”

McKinsey & Company

“Designing prizes is a complicated task. It is not possible to replicate the success of the Nobel Prizes, the NetfliX PRIZE, or the X PRIZEs without investing significant resources in the steps that make those so distinctive: the processes, design features, and strategies that the custodians of those prizes continue to refine. Some of the best prizes invest more than a year in initial prize development, and more time in later evaluation and refinement.”

IBM

“Properly designed prizes may accelerate the speed of technology development, incentivize creativity that leads to new inventions, promote the introduction, application and diffusion of existing technologies, stimulate performance improvements, and bring on new forms of R&D organization.”

Siddhartha Mukherjee (from his 2010 Pulitzer Prize Winning Work: The Emperor of All Maladies)

“In the late 1920s… cancer research found a new and unexpected champion - Matthew Neely, a dogged and ebullient former lawyer from Fairmont, West Virginia, serving his firm term in the Senate. Although Neely had relatively little experience in the politics of science, he had noted the marked increase in cancer mortality in the previous decade – from 70,000 men and women in 1911 to 115,000 in 1927. Neely asked Congress to advertise a reward of $5 million for any “information leading to the arrest of human cancer.”  …It was a lowbrow strategy – the scientific equivalent of hanging a mug shot in a sheriff’s office – and it generated a reflexively lowbrow response. Within a few weeks, Neely’s office in Washington was flooded with thousands of letters from quacks and faith healers purporting every conceivable remedy for cancer: rubs, tonics, ointments, anointed handkerchiefs, salves, and blessed water. Congress, exasperated with the response, finally authorized $50,000 for Neely’s Cancer Control Bill, almost comically cutting its budget back to just 1 percent of the requested amount.”  (Makherjee, 2010: 25)


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